Gluskin Sheff + Associates Inc.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the conflict of interest restrictions in the Securities Act (Ontario) to permit fund-on-fund structures involving pooled funds under common management subject to conditions.

Applicable Legislative Provisions

Securities Act (Ontario) R.S.O. 1990, c. S.5, as am., ss. 111(2)(b), 111(2)(c), 111(4) and 113.

October 2, 2019

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF GLUSKIN SHEFF + ASSOCIATES INC. (the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Filer, a mutual fund trust to be formed under the laws of Ontario (the Initial Top Fund), one or more other funds which will be established, advised and managed by the Filer in the future (the Future Top Funds and together with the Initial Top Fund, the Top Funds), Onex Senior Credit Fund, L.P., a Cayman Islands exempted limited partnership (the Initial Underlying Fund) and one or more other funds which have been or will be established and which are or will be advised and managed by Onex Credit Partners, LLC (Onex Credit) to operate as an underlying fund in a "fund-on-fund" structure (the Future Underlying Funds and together with the Initial Underlying Fund, the Underlying Funds and together with the Top Funds, the Funds and each a Fund), for a decision under the securities legislation of the principal regulator (the Legislation) exempting the Funds from:

(a) the prohibition in the Legislation against an investment fund knowingly making an investment in any person or company in which the investment fund, alone or together with one or more related investment funds, is a substantial securityholder;

(b) the prohibition in the Legislation against an investment fund knowingly making an investment in an issuer in which (i) any officer or director of the investment fund, its management company or distribution company or an associate of any of them, or (ii) any person or company who is a substantial securityholder of the investment fund, its management company or its distribution company, has a significant interest; and

(c) the prohibition in the Legislation against an investment fund knowingly holding an investment described in (a) or (b) above;

(the above subsections (a), (b) and (c) are collectively, the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) in respect of the Requested Relief, the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System is intended to be relied upon in Alberta.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions or the Act have the same meanings if used in this decision unless they are otherwise defined in this decision.

Representations

The Filer and Affiliates

1. The Filer was founded in 1984 and is one of Canada's pre-eminent wealth management firms serving high net worth private clients and institutional investors. The Filer primarily offers fully discretionary accounts (Discretionary Accounts) that invest in equity, fixed income, alternative credit and alternative equity investment portfolios managed by the Filer and also distributes interests in certain investment funds managed by the Filer or its affiliates directly to investors (Direct Clients) who may not have a Discretionary Account with the Filer.

2. The head office of the Filer is located at Bay Adelaide Centre, 333 Bay Street, Suite 5100, Toronto, Ontario M5H 2R2.

3. The Filer is registered in each of the provinces and territories as a portfolio manager (other than Prince Edward Island and Nunavut) and as an exempt market dealer (other than Prince Edward Island, Nunavut and the Yukon) and is registered in Ontario, Quebec and Newfoundland and Labrador as an investment fund manager. The Filer is also registered in Ontario as a commodity trading manager.

4. On March 22, 2019, the Filer entered into an arrangement agreement with Onex Corporation, pursuant to which Onex Corporation agreed to acquire all of the issued and outstanding common shares of the Filer by way of a court-approved plan of arrangement under the provisions of Section 182 of the Business Corporations Act (Ontario) (the Arrangement).

5. The Arrangement was completed June 1, 2019 and Onex Corporation, directly and indirectly, acquired all of the issued and outstanding common shares of the Filer.

6. Onex Corporation was founded in 1984 by Gerald W. Schwartz to make private equity investments in companies located primarily in North America. Today, the firm operates from offices located in Toronto (established in 1984), New York (established in 1986), New Jersey (established in 2007) and London (established in 2012). Onex Corporation's shares trade on the Toronto Stock Exchange under the stock symbol "ONEX".

7. Onex Credit, a U.S.-based limited liability company with its head office located in New Jersey, USA, is the manager of the Initial Underlying Fund.

8. Onex Credit was co-founded by Michael J. Gelblat and Stuart Kovensky and has a track record that includes managing senior secured loans, high-yield bonds and other fixed income instruments since 2001. Today, Onex Credit manages primarily non-investment grade debt through collateralized loan obligations, private debt and other credit strategies.

9. Onex Credit is the credit investing platform of Onex Corporation and is owned indirectly by Onex Corporation and Mr. Gelblat (or certain trusts or other entities which he created).

10. Onex Credit currently is registered in the province of Ontario as a portfolio manager, in the provinces of Ontario, Quebec and Newfoundland and Labrador as an investment fund manager and in each of the provinces and territories of Canada as an exempt market dealer.

11. The Filer will be the investment manager and portfolio manager of each of the Top Funds.

12. The Filer is not a reporting issuer in any jurisdiction of Canada and is not in default of securities legislation in any province or territory of Canada.

13. Onex Credit is not a reporting issuer in any jurisdiction of Canada and is not in default of securities legislation in any province or territory of Canada.

14. Onex Corporation is a reporting issuer and is not in default of securities legislation in any province or territory of Canada.

The Top Funds

15. Contemporaneously with obtaining a decision from the OSC in connection with this application, the Initial Top Fund will be formed pursuant to a supplement to the master declaration of trust dated as of February 28, 2019.

16. Each of the Top Funds will be a "mutual fund" under the Legislation.

17. Units of each of the Top Funds (a) will be available for investment by the Filer's Discretionary Accounts and (b) may be offered to Direct Clients, in each case exclusively on a private placement basis pursuant to available exemptions from the prospectus requirements under Canadian securities legislation.

18. Each of the Top Funds will be managed by the Filer and the Filer will act as trustee.

19. Each Top Fund and the corresponding Underlying Fund will have substantially the same investment objectives and strategies and as such, the investments held by an Underlying Fund will be compatible with the investment objectives and strategies of the corresponding Top Fund.

20. Each Top Fund is not, and will not become, a reporting issuer in Canada.

The Underlying Funds

21. The Initial Underlying Fund is a Cayman Islands exempted limited partnership and was established as of December 1, 2007.

22. The Initial Underlying Fund's investment objective and strategy is to provide investors with attractive risk-adjusted returns primarily by purchasing exposure to syndicated leveraged loans.

23. Each Future Underlying Fund will be structured as a limited partnership or other entity under the laws of: a province or territory of Canada, the Cayman Islands, the United States, Barbados, Bahamas, Ireland, Luxembourg, the Netherlands or the British Virgin Islands.

24. Onex Credit is, or will be, the investment fund manager and portfolio manager of each of the Underlying Funds.

25. None of the Underlying Funds is, or will become, a reporting issuer in Canada. Each existing Underlying Fund is not in default of securities legislation in any province or territory of Canada.

Fund-on-Fund Structure and Submissions

26. Securities of the Initial Underlying Fund, structured as a limited partnership, are not qualified investments for tax-free savings accounts (TFSAs) or trusts governed by registered retirement savings plans, registered retirement income funds, registered education savings plans, deferred profit sharing plans or registered disability savings plans each as defined in the Income Tax Act (Canada) (collectively, Tax Deferred Plans).

27. The Top Funds will be formed as mutual fund trusts in a jurisdiction of Canada for the purpose of accessing a broader base of investors, including TFSAs, Tax Deferred Plans and other investors that may not wish to invest directly in an entity resident in a jurisdiction outside of Canada.

28. For each Top Fund in a fund-on-fund structure, Onex Credit will be able to manage a single portfolio of assets which gives the Filer's Discretionary Accounts and Direct Clients access on a tax effective basis to an Onex Credit-managed portfolio in such Underlying Fund.

29. Managing a single pool of assets provides economies of scale, allows a Top Fund to achieve its investment objective in a cost-efficient manner and eases the burden of balancing and re-balancing portfolios that may be necessary across separate fund structures with identical objectives and strategies.

30. The fund-on-fund structure is also expected to increase the asset base of the Underlying Funds, which is expected to result in additional benefits to holders of interests in the Underlying Funds, including more favourable pricing and transaction costs on portfolio trades, increased access to investments when there is a minimum investment amount and better economies of scale through greater administrative efficiency.

31. In the absence of the Requested Relief, a Top Fund would be precluded from investing substantially all of its assets directly or indirectly in an Underlying Fund because: (a) the amounts invested, from time to time, may result in the Top Fund becoming a substantial securityholder of the Underlying Fund; and (b) a substantial securityholder of the Filer has, or may have, from time to time, a significant interest in the Underlying Fund.

32. In connection with the fund-on-fund structure, the Filer specifically submits as follows:

(a) No Underlying Fund will itself be a top fund in a fund-on-fund structure.

(b) Each Underlying Fund has, or is expected to have, other investors in addition to a Top Fund.

(c) Securities of each Top Fund and its corresponding Underlying Fund will have monthly redemption and monthly valuation dates on the last business day of each calendar month.

(d) The Filer will manage the liquidity of each Top Fund having regard to the redemption features of the corresponding Underlying Fund to ensure that it can meet redemption requirements for Discretionary Accounts and any redemption requests from Direct Clients.

(e) An investment in an Underlying Fund by a Top Fund will be effected at an objective price. Generally, for this purpose, the objective price will be the net asset value per security of the applicable class or series of the Underlying Fund or will otherwise be determined in accordance with the policies and procedures of the Filer and the manager of the Underlying Fund.

(f) No Underlying Fund holds, or will hold, for a period of 90 days or more, more than 10% of its net asset value in illiquid assets (as defined in National Instrument 81-102 -- Investment Funds) and thereafter as quickly as commercially reasonable will take all necessary steps to reduce the percentage of its net asset value made up of illiquid assets to 10% or less. In the case of the Initial Underlying Fund, the value of the Initial Underlying Fund's total return swap (the TRS), with a Canadian Schedule I bank counterparty, may represent more than 10% of the Initial Underlying Fund's assets. The reference assets of the TRS are priced daily. The TRS can be partially terminated on a daily basis to provide the liquidity required to meet the redemptions of the Top Fund.

(g) The Top Funds and Underlying Funds subject to National Instrument 81-106 -- Investment Fund Continuous Disclosure (NI 81-106) will prepare annual audited financial statements and interim unaudited financial statements in accordance with Nl 81-106 and will otherwise comply with the requirements of Nl 81-106 applicable to them.

(h) The investment assets of each Fund are and will continue to be, or will be, held in accordance with sections 14.5.2 to and including 14.6.2 of National Instrument 31-103 -- Registration Requirements, Exemptions and Ongoing Registrant Obligations.

(i) The Filer will not vote the securities of an Underlying Fund held by a Top Fund and attributable to Direct Clients at a meeting of holders of such securities, except that the Filer may arrange for the securities that a Top Fund holds of an Underlying Fund to be voted by the Direct Clients that hold securities of the Top Fund who are not the Filer or an officer, director or substantial securityholder of the Filer.

(j) When purchasing and/or redeeming securities of an Underlying Fund, the Filer and the manager of the Underlying Fund shall, as managers of the applicable Top Fund and Underlying Fund, respectively, act honestly, in good faith and in the best interests of the Top Fund and the Underlying Fund, respectively, and shall exercise the care and diligence that a prudent person would exercise in comparable circumstances.

(k) There will not be any duplication of management fees or performance allocations, distributions or other similar participations in the profits of the Funds, paid to the Filer, Onex Credit or any of their affiliates in connection with the Funds operating as a fund-on-fund structure or any Top Fund's investment in an Underlying Fund.

33. Holders of Discretionary Accounts and Direct Clients will be advised in writing prior to the time of investment: (a) that the Top Fund may purchase securities of a corresponding Underlying Fund; (b) that the Filer will be the investment fund manager and portfolio manager of the Top Fund and that Onex Credit will be the investment fund manager and portfolio manager of the Underlying Fund; (c) that each of the Filer and Onex Credit is a direct or indirect subsidiary of Onex Corporation; (d) that the Top Fund may invest all, or substantially all, of its assets in securities of the corresponding Underlying Fund; (e) the fees, expenses and any performance or special incentive distributions payable by the Underlying Fund in which a Top Fund invests; and (f) the process or criteria used to select the Underlying Fund, if applicable.

34. The investment by the Initial Top Fund of substantially all of its assets in the Initial Underlying Fund and the investment by each Future Top Fund of substantially all of its assets in a corresponding Future Underlying Fund represents the business judgment of responsible persons of the Filer uninfluenced by considerations other than the best interests of the Funds.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that:

The Requested Relief is granted provided that:

1. securities of Top Funds are distributed in Canada solely pursuant to exemptions from the prospectus requirement under Canadian securities legislation;

2. the investment by a Top Fund in a corresponding Underlying Fund is compatible with the fundamental investment objectives of the Top Fund;

3. an investment in an Underlying Fund by a Top Fund will be effected at an objective price, calculated in accordance with section 14.2 of NI 81-106;

4. a Top Fund will not invest in an Underlying Fund that is not a reporting issuer unless the Underlying Fund prepares annual audited financial statements for the Underlying Fund's most recently completed financial year and interim financial statements for the Underlying Fund's most recently completed interim period;

5. no Top Fund will purchase or hold a security of an Underlying Fund unless at the time of purchasing securities of the Underlying Fund, the Underlying Fund holds no more than 10% of its net asset value in securities of other mutual funds;

6. no management fees or incentive fees are payable by a Top Fund that, to a reasonable person, would duplicate a fee payable by an Underlying Fund for the same service;

7. no sales fee or redemption fees are payable by a Top Fund in relation to its purchases or redemptions of securities of an Underlying Fund that, to a reasonable person, would duplicate a fee payable by an investor in the Top Fund, other than brokerage fees incurred for the purchase or sale of an index participation unit issued by an investment fund;

8. the Filer will not vote the securities of an Underlying Fund held by a Top Fund and attributable to Direct Clients at a meeting of holders of such securities, except that the Filer may arrange for the securities that a Top Fund holds of an Underlying Fund to be voted by the Direct Clients that hold securities of the Top Fund who are not the Filer or an officer, director or substantial securityholder of the Filer;

9. when purchasing and/or redeeming securities of an Underlying Fund, the Filer and the manager of the Underlying Fund shall, as managers of the applicable Top Fund and Underlying Fund, respectively, act honestly, in good faith and in the best interests of the Top Fund and the Underlying Fund, respectively, and shall exercise the care and diligence that a prudent person would exercise in comparable circumstances;

10. a disclosure document, including an offering memorandum where available, of a Top Fund shall be provided to each investor in a Top Fund prior to the time of the investor's investment, and shall disclose:

(a) that the Top Fund may purchase securities of an applicable, identified Underlying Fund and that if the Top Fund decides to purchase securities of an Underlying Fund that is not identified in the disclosure document, the Top Fund will notify investors of the Top Fund at the time of the purchase;

(b) that the Filer is the investment fund manager and portfolio manager of the Top Fund and that an affiliate of the Filer is the investment fund manager and portfolio manager of the Underlying Fund;

(c) the approximate or maximum percentage of net assets of the Top Fund that is intended be invested in securities of Underlying Funds;

(d) the fees, expenses and any performance or special incentive distributions payable by an Underlying Fund in which the Top Fund invests;

(e) the process or criteria used to select an Underlying Fund;

(f) for each officer, director and/or substantial security holder of the Filer, or of a Top Fund, that has a significant interest in an applicable Underlying Fund, and for the officers and directors and substantial security holders who together in aggregate hold a significant interest in an applicable Underlying Fund, the approximate amount of the significant interest they hold, on an aggregate basis, expressed as a percentage of the applicable Underlying Fund's NAV, and the potential conflicts of interest which may arise;

(g) that investors are entitled to receive from the Filer, on request and free of charge, a copy of the offering memorandum or other similar disclosure document of each Underlying Fund, if available; and

(h) that investors are entitled to receive from the Filer, on request and free of charge, the annual audited financial statements and interim financial reports relating to each Underlying Fund in which the Top Fund invests; and

11. the Filer shall annually inform investors in a Top Fund of their right to receive from the Filer, on request and free of charge, a copy of the offering memorandum or other similar disclosure document of each Underlying Fund, if available, and the annual audited financial statements and interim financial reports relating to each Underlying Fund in which the Top Fund invests.

"Raymond Kindiak"	"M. Cecilia Williams"
Commissioner	Commissioner
Ontario Securities Commission	Ontario Securities Commission